South African Rand vs the Pound: GBP/ZAR Turning Positive, 16.9500 in Crosshairs
GBP/ZAR gapped down on Monday and then reversed and surged higher after Theresa May’s Brexit speech encouraged Sterling bulls.
The sudden volatile rotation is symptomatic of a reversal of the short-term trend and with the recent break above the 16.7750 highs, we see a high chance now that the short-term trend has reversed and started to move higher.
The pair has paused since peaking at 16.7750 and on the four-hour chart has unfolded in a sideways range which looks like a bullish flag.
Given the pair is now starting to break above the range highs and move up we see a high chance of an extension all the way up to probably the old trendline at 16.9500 where it will meet solid resistance and likely pause.
A move above 16.8000 would provide redoubled confirmation of more upside.
Rand is 'One Dimensional'
In 2017 the Rand has functioned as the ‘passive partner’ in its pair.
“Rand trade thus far in 2017 has proven to be thin, boring, and largely one-dimensional: apart from a brief scare over Turkey, USD/ZAR has largely just tracked the directionless up-and-down swings in EUR/USD,” says Rand Merchant Bank’s strategist John Cairns.
Whilst the USD has recovered overnight due to Janet Yellen’s remarks that it “makes sense” raise interest rates, we are concerned with the Pound here, which has moved sideways after the initial furore over Theresa May’s Brexit speech wore off.
Despite dangling the possibility of a free trade deal and saying Parliament will have a vote, Brexit concerns linger.
Recent comments from the chief of the European commission Jean-Claude Juncker, that Brexit talks would be “very, very difficult,” have raised concerns the UK may not get a very good deal, especially for the economy.
News that one of the globe’s largest Banks HSBC is moving its headquarters out of London because of Brexit further fuelled concerns.
Nevertheless, some analysts, like Scotiabank’s Shaun Osborne are a bit more positive about the outlook for Sterling, saying that most of the bad news must be priced in now and the ‘only way is up’ so to speak.
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